The Delaware Supreme Court cut Tesla's legal obligations in a shareholder lawsuit over director compensation, reducing attorney fees from $176.1 million to $70.9 million after deeming a lower court's settlement valuation excessive. CEO Elon Musk hailed the ruling on X as 'saving the state.'
On January 30, the Delaware Supreme Court significantly reduced the legal fees Tesla Inc. must pay in a shareholder lawsuit accusing its directors of excessive compensation through self-dealing. The court lowered the fees from $176.1 million—awarded by a Delaware Chancery Court judge—to $70.9 million.
The lawsuit was led by the Detroit firefighter and police pension fund. Directors, including Chair Robyn Denholm and James Murdoch, settled by returning about $277 million in cash and stock options to Tesla. Shareholder attorneys valued the settlement at $919 million to justify their fee request, but the Supreme Court ruled that the intrinsic value of the returned stock options should not be included in that assessment. Tesla bears the fees as the direct beneficiary of the repayments.
Tesla CEO Elon Musk reacted on X (formerly Twitter), posting: “Delaware Supreme is saving the state.” Musk was not part of this settlement; in a separate case, the Supreme Court recently overturned a Chancery Court decision voiding his 2018 compensation package, deeming it improper.
The ruling intensifies scrutiny over legal fee awards in Delaware's corporate courts, highlighted by cases like a $267 million award involving Dell Technologies in 2024. Delaware's bar association is preparing reform recommendations for lawmakers.
